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There is a lot of false information or ‘myths’ out there about debts and bankruptcy, which we have found to be harmful to people, causing them unnecessary stress and worry. Read on and let’s debunk those myths!

DEBT MYTHS

1. MYTH: “If I don’t pay my debts, I’ll go to prison.”

>>> TRUTH: Not being able to afford debt repayments is NOT a criminal offence. You won’t go to prison just because you can’t pay your debts although this was the case over a century ago. Some priority debts could result in imprisonment, for example magistrates fines, licences, child maintenance, business rates, but this would be used as a very last resort if you’ve ignored the debt, refused to pay or failed to cooperate with the courts. It would take a long time to get there, as many other debt enforcement methods would be used first.

>>> TRUTH: Creditors can only attach funds from your bank account if you have above £494.01 in your account. This amount is set by law and is periodically revised. If you have various accounts in different banks, £494.01 is protected in each account. You can challenge this bank arrestment through the courts if it is causing you hardship.

3. MYTH: “If my wages get arrested, creditors could take most of my wages.”

>>> TRUTH: The amount creditors could deduct from your wages is capped by law, depending on your income. For example, creditors cannot get anything from your wages if you earn less than £113.68 per week. If you earn between £113.68 and £410.9 per week, they can take £4 per week or 19% of any wages exceeding £113.68 per week, whichever is the greater. That’s the total amount creditors can get, so if there are several creditors they would have to share this amount between them. However, the situation is different if you owe money to the DWP (benefit overpayments), as they could take up to 40% of your net wages (or share this amount with other creditors) and leave you with 60% of net earnings.

4. MYTH: “Sheriff Officers could turn up at my door to intimidate me and can be quite aggressive.”

>>> TRUTH: Recent TV programmes may have shown images of abusive and aggressive ‘bailiffs’ (that’s the name for Sheriff Officers in England and Wales). However this is not the reality of Sheriff Officers’ behaviour in Scotland. If someone comes to your door, beware that they may not be actual Sheriff Officers but debt collectors working for creditors instead. These people don’t have any powers at all. Report any threatening behaviour to the Police.

5. MYTH: “Creditors can send Sheriff Officers to force entry into my property and take things from my house.”

>>> TRUTH: For Sheriff Officers to force entry into your property, there must have been a court order giving creditors permission to do so. Exceptional attachment orders are very, very rare in Scotland. You would be notified of any such visit in writing beforehand. To get to that point, creditors must prove that they have tried other means (e.g. bank arrestment) and that there is something worth getting in the house—which is why they will send someone round your home to try and get invited in. To avoid this, never let anyone in your property unless they have a court order.

6. MYTH: “If I don’t pay my debts, I will be blacklisted.”

>>> TRUTH: There is no such thing as a blacklist. However your debts, and whether or not you have repaid them, are recorded in your credit report. This is what creditors use to decide whether to lend you money. You can request a copy of your credit report and ask for any inaccurate information to be corrected.

7. MYTH: “My debts are written off if I haven’t made a payment in 5 years.”

>>> TRUTH: A debt can become “statute barred” (or “extinguished”) after5 years if the debtor hasn’t made a payment or admitted the debt AND if the creditor has not taken legal action to enforce the debt. The debt still exists but the creditor can no longer enforce the debt, i.e. they cannot arrest your wages or your bank account or make you bankrupt, although they may still continue to contact you and ask for payments. However, for some debts such as council tax arrears, court decrees and benefit overpayments, the time limit extends to 20 years before they can become “statute-barred” assuming all other conditions are also met (as explained above).

8. MYTH: “I am liable for my partner’s debts.”

>>> TRUTH: You are not liable for other people’s debts, unless there is a guarantor agreement, or a joint liability for a tenancy, a joint bank account or a joint loan agreement or council tax arrears for example.

BANKRUPTCY MYTHS

1. MYTH: “I cannot be made bankrupt because of council tax arrears.”

>>> TRUTH: You can be sequestrated for council tax arrears, especially if you are a home owner and the council suspects that you have equity in your house which could be used to repay the debt. It is also worth pointing out that in Scotland, water and sewerage charges are collected through council tax. Even if you get the maximum council tax reduction, you will still need to pay some money to the council every month for these water charges, or you would risk accruing arrears.

2. MYTH: “If I go bankrupt, I will automatically lose my home.”

>>> TRUTH: If you are a home owner, your house may be repossessed as bankruptcy gives your Trustee (who is in charge of your finances for the duration of the bankruptcy) the right to sell your assets for the benefits of your creditors. However, if you have little or no equity in your home, your Trustee may decide not to sell your property, as long as your mortgage is affordable and comparable to the cost of local rents.

>>> TRUTH: To go bankrupt, there is an initial fee, which is between £90 and £200 depending on your financial circumstances. You may have to pay some money towards your debts, known as a Debtor Contribution Order, for up to 4 years if you are assessed as having surplus income. However, if you are assessed as not having any surplus income or if you are on means-tested benefits, you won’t have to pay anything towards your debts once you are sequestrated.

4. MYTH: “If I go bankrupt, my name will appear in the local newspaper.”

>>> TRUTH: There used to be a section in the local newspaper for bankruptcy, to inform creditors. This is no longer the case. If you are sequestrated, your name will go on an online public register which is searchable by name.

For debt advice, call us on 0131 442 2100 to book an appointment.

Click here to read our next post on ‘Debunking Harmful Myths about Benefits’

The benefit cap came into force in April 2013 but the cap levels were lowered in November 2016 which led to an increasing number of people being affected by it. Read on to find out who is affected and how to avoid it.

WHO IS AFFECTED?

The benefit cap only affects people aged between 16 to 64 who are claiming Housing Benefit or Universal Credit, if the total amount of benefits they receive is over a certain threshold. If the cap affects them, their Housing Benefit or Universal Credit is reduced to make sure the total they get is not more than the cap amount, which is:

£384.62 a week for a couple with or without dependent children.

£384.62 a week for a lone parent with dependent children.

£257.69 a week for a single person without children.

Families with 3 children and more tend to be the most affected by the benefit cap.

EXEMPTIONS

There are ways to avoid the benefit cap. Going back to work, or increasing your working hours may give you an exemption to the benefit cap, because people who receive Working Tax Credits are not affected by the benefit cap. For lone parents, working as little as 16 hours a week would be sufficient to get Working Tax Credits.

For those who get Universal Credit, there is no benefit cap if your nethousehold’s earnings are over £520 a month.

You will also be exempt from the benefit cap if you, your partner or child receive any of the following benefits:

A disability benefit such as DLA or PIP, or the Support Component of ESA or Universal Credit.

Carer’s Allowance.

Guardian’s Allowance.

An Armed Forces payment.

OTHER SOLUTIONS

For many people, going back to work, or increasing working hours, will be the best solution to the problem of the benefit cap. However, there are other short-term solutions that you may consider such as:

Applying for discretionary housing payment (DHP) from the Council, to help you pay your rent shortfall. DHP will cover 100% of the shortfall for 3 months. This is then reduced to 75% and gradually to zero overtime.

Moving house to find cheaper rent in a different tenancy.

Maximising your income.

Ask us for advice! Book an appointment to see one of our advisers.

SOME STATISTICS ON THE BENEFIT CAP

(Source: www.gov.uk, August 2017)

How many households are affected by the benefit cap?

68,000 in the UK

3,810 in Scotland

653 in Glasgow

605 in Edinburgh

How many children have the capped households?

93% have at least a child

41% have 3 children

15% have 2 children

10% have 5+ children

CASE STUDY ON THE BENEFIT CAP

The Problem

Claire is 40-year-old mother of 4 children aged 4, 8, 12 and 14. She lives in a 3-bedroom private let costing £675 per month. Claire suffers from poor health and is currently unfit for work and claiming Employment and Support Allowance as well as Child Benefit, Child Tax Credits and the Local Housing Allowance.

Claire is affected by the Benefit Cap as she receives over £364.62 per week on benefits. As a result, she only receives £25 towards her housing costs. Claire is financially unable to pay her remaining rent shortfall and relies heavily on her ex-partner for financial support.

Her ex-partner is now unable to support her, and Claire is now at risk of homelessness. Claire has come to the CHAI Advice service at her local school for housing options and income maximisation. Claire’s mental health is deteriorating as she is fearful her family may become homeless.

What CHAI did

CHAI assisted Claire by runninga Benefit Check to ensure Claire was in receipt of all benefits she was entitled to and confirmed she was affected by the Benefit Cap.

CHAI helped Claire apply for a Discretionary Housing Payment (DHP) through the Council to help cover her rent shortfall for a short period of time. The application was successful, and Claire’s rent shortfall was paid for 3 months. This stabilised Claire’s housing situation for a few months and ensured she did not accrue rent arrears.

CHAI further advised Claire that claiming certain benefits such as Personal Independence Payment (PIP) makes you exempt from the Benefit Cap and that it would greatly maximise her income. Due to Claire’s poor physical and mental health conditions that challenge her daily, she decided to apply for PIP.

CHAI helped her complete the PIP application form, contacted her health workers for further medical evidence and was successful with the claim. Claire now receives £119.80 per week from PIP and is therefore exempt from the Benefit Cap. She now receives full Local Housing Allowance to cover her full rent charge of £675.

As Claire is a single adult and receives the Daily Living Component of PIP, CHAI was also able to apply for a Severe Disability Premium for her ESA for an additional £62.00 per week.

Overall, CHAI assisted this parent to maintain their current tenancy and maximise their annual income by £17,553.

Here are key facts to maximise your income and avoid benefit overpayments. These facts are very much worth knowing about. You can download our factsheet (PDF) here.

What To Do If You Urgently Need Money

If you have no money due to a crisis or emergency, apply to the Council’s Scottish Welfare Fund for a Crisis Grant which you won’t need to pay back. You’ll find a list of all contact details in this document.

If you are waiting for your new benefit claim to start, you can apply to the Department for Work and Pensions (DWP) for a Benefit Advance.

Changes in Circumstances

Report all changes in your circumstances to the Council, the Department for Work and Pensions (DWP) and HMRC’s Tax Credits Office. Don’t assume that these three bodies share information. It is your duty to report any changes, for example when: you stop work or start another job; you increase your hours at work; your wages or benefits go up or down, e.g. you get an annual pay increase; someone moves in or out; you start a new relationship, get married or break up with someone; you have a baby; your child stops full-time education; or your childcare costs go up or down.

Ask for a receipt when you hand in evidence to the Council or the JobCentre, and take note of the date, time and the name of the person you speak to, if you report a change over the phone.

Changes in Circumstances – Housing Benefit

You must contact the ‘Revenues and Benefits’ section of the Council to notify your changes in circumstances, and not rely on your housing officer to pass on the information for you, even if you are a Council tenant.

For any change in circumstances related to jobs, the Council will need to see your P45 (if you’ve stopped a job) and your last 2 monthly payslips, 5 weekly payslips or 3 fortnightly payslips for any new job.

Inform the Council when your child reaches their 16th or 18th birthday or when you stop getting Child Benefit for them, as this will affect your Housing Benefit.

Housing Benefit Issues

You may have to pay some rent even if you are on means-tested benefits, for example due to a non-dependant deduction if you have adult relatives living with you (even when they are neither working nor claiming benefits), or due to a Housing Benefit overpayment. Check your rent charge with the Council.

If you are affected by the Benefit Cap or by the Bedroom Tax because you have a spare bedroom, go to the Council and apply for Discretionary Housing Payments.

If you are struggling to pay your rent despite getting Housing Benefit, you may also qualify for extra help from Discretionary Housing Payments. Ask your local Council for an application form.

To avoid overpayments, check your Housing Benefit award letter to make sure the Council have the right income details for you—these are shown on the left bottom corner of the letter. If in doubt, phone them and ask what income details they have on records.

Tax Credits

Children who turn 16 are automatically removed from your Tax Credits claim at the end of August following their 16th birthday. You must contact the Tax Credits Office to advise if your 16-year old child is continuing in education or not.

Benefit Sanctions

If your JSA, Universal Credit or ESA has been sanctioned, apply to your local JobCentre for Hardship Payments. If you have no money at all while you wait for Hardship Payments, apply to the Council’s Scottish Welfare Fund for a Crisis Grant. You can challenge/appeal any sanction. Ask us for help.

Your Housing Benefit will be stopped or ‘suspended’ during the sanction. It does not mean you stop being entitled to Housing Benefit; it’s just that the Council must re-assess your income. Write to the Council to let them know you have no other income or savings, and give them a bank statement for the period of the sanction, so they can reinstate your Housing Benefit.

A Handy List of Phone Numbers

Click here to download a list of useful phone numbers to reach DWP’s various benefit departments and some other numbers for The City of Edinburgh Council such as Revenues and Benefits, EdIndex, Social Care Direct etc. Contact us if you would like a hard copy of this document.

There is a lot of false information or ‘myths’ out there about benefits and council tax, which we have found to be harmful to people, causing them unnecessary stress and worry and leading to benefit problems. Read on and let’s debunk those myths!

Benefits

1. MYTH: “The Department for Work and Pensions (DWP), HMRC (the ‘taxman’/tax credits office) and the Council Housing Benefit Department all communicate so if you tell one of them about a change in your circumstances (e.g. that you’ve stopped signing on, started or stopped a job, or had a pay increase), they’ll tell the others.”>>> TRUTH: The DWP, the Council and HMRC don’t share information. It is your duty to report any change in circumstances to each of them.

2. MYTH: “If you are a Council tenant, you can report your changes in circumstances to your Housing Officer for your Housing Benefit to be updated.”>>> TRUTH: You must contact the Revenues and Benefits section of the Council to notify your changes in circumstances. Don’t just speak to the receptionist of the local Council Office either. Hand in a letter to Revenues and Benefits and ask for a receipt, or email them at incomeandbenefits@edinburgh.gov.uk, or phone them on 0131 608 1111.

3. MYTH: “You can’t claim Housing Benefit if you have rent arrears.”>>> TRUTH: You can claim Housing Benefit even if you have rent arrears, if you qualify based on your income. What you cannot get is Discretionary Housing Payment to pay off your rent arrears. If you are in arrears, seek help to appeal any gaps in your housing benefit and arrange an affordable repayment plan to repay your arrears.

4. MYTH: “You can’t claim Housing Benefit if you are working.”>>> TRUTH: You may be able to get some Housing Benefit even if you are working depending on your wages. How much Housing Benefit you’ll get is determined by your earnings.

5. MYTH: “Non-dependant charges won’t be applied to your Housing Benefit if your adult children are not working.”>>> TRUTH: Non-dependant deductions will apply even if your adult children or other non-dependants who live with you (excluding your partner) have no benefit income and no earnings. There are exemptions: if your non-dependant is in full time education or if they are under 25 and on means-tested benefits such as JSA.

Benefit Sanctions

6. MYTH: “You cannot challenge a benefit sanction.”>>> TRUTH: You can appeal any sanction—the first stage is to ask the DWP to reconsider their decision and give reasons why. Ask us for help. While the appeal is being processed, apply to your local JobCentre for Hardship Payments and to the Council’s Scottish Welfare Fund for a Crisis Grant.

7. MYTH: “When you’re sanctioned you stop being eligible for housing benefit.”>>> TRUTH: Your Housing Benefit will be stopped or ‘suspended’ during the sanction. It does not mean you stop being entitled to Housing Benefit; it’s just that the Council must re-assess your income. Write to the Council to let them know you have no other income or savings, and give them a bank statement for the period of the sanction, so they reinstate your Housing Benefit.

Council Tax

8. MYTH: “You don’t have to pay any council tax if you are on benefits such as JSA, ESA, Income Support.”>>> TRUTH: In Scotland, water and sewerage charges are collected through council tax. Even if you get the maximum council tax reduction, you will still need to pay some money to the council every month for these water charges.

CHAI are now providing free, impartial and confidential advice directly to families across Edinburgh whose children attend the following schools –

Tynecastle High School

Dalry Primary School

Stenhouse Primary School

Pilrig Park School

Rowanfield School

The appointments are based within each school to make the service more accessible for parents/ guardians who may be struggling with:

Housing Issues

Debt Problems

Income Maximisation

Welfare Rights

Book an Appointment Today

We believe everyone should have the same opportunity to accessing advice services so if you’re in need of help or wish to refer a client for an appointment, please contact the relevant school above for further details.

Newsletters

We issue bi-monthly newsletters to keep parents updated on welfare rights issues that are relevant to them.

For example, in our first issue, we cover help with school meals and school uniforms, disability benefits for children over 16 transitioning from Disability Living Allowance (DLA) to Personal Independence Payment (PIP), and how to avoid tax credits pitfalls.

CHAI has been commissioned by Trading Standards Scotland to deliver a new ‘Financial Inclusion & Capability Service’ (FICS), aimed at promoting improved financial capacity for those who may be at particular risk of having to turn to illegal money-lenders.

The new Project works with the four Recovery Hubs in Edinburgh, focusing on income maximisation, debt management and financial education.

Newsletters

As part of the project, we issue bi-monthly newsletters on money advice issues. So far, our newsletters have focused on budgeting, access to free banking, the costs of borrowing, the dangers of illegal lending, and alternative forms of affordable credit.

SWOP (South-West Edinburgh Outreach Project) is a collaborative partnership between Prospect Community Housing, CHAI, the City of Edinburgh Council’s South-West Neighbourhood Office and local support providers.

SWOP delivers Advice, Information and Representation on a wide range of social security benefits, income maximization, housing and debt issues to social rented sector tenants across the South West of the City – via weekly drop in and appointment sessions at local venues:

Prospect Community Housing led a successful bid to the programme, with CHAI as a partner, and the award allowed the employment of a dedicated Welfare Rights Worker by CHAI – who have been delivering the new SWOP Project since November 2013.

In that period the project has:

Advised 742 individual clients

Dealt with 1,201 issues raised by them

Recorded £591,137 in income gains for these clients through the claiming of new benefits or accessing charitable trust funds.

Represented, or referred on for representation to EHAP colleagues, in 118 Tribunal or Sheriff Court Cases

Demonstrating a clear need for the service and its ability to deliver.

Further information on SWOP (and how to access appointments at the local venues) can be obtained from Jim Henderson or Lorena McLaughlin at CHAI Advice Service (0131 442 1009), or Caroline Richards at Prospect CH (0131 458 5480).

Today’s Guest Blog is from Nellie Allen-Logan, an Intern who is on placement with our Edinburgh Housing Advice Partnership (EHAP) Service. Nellie is in the final year of a Law Degree at Arizona Summit University, and we asked her to reflect on her experience of the civil legal system in Scotland compared with ‘back home’ …

Even though it was in the middle of winter when I arrived in Scotland from sunny Arizona, my shock did not come from the weather, but from the vast differences in law. The United States (U.S.) brought their common law from England through the Magna Carta. However, Scotland does not follow English law, but Roman law. Their common law is an ancient set of rules that are not written down, but govern by word of mouth. Common law in the U.S. follows old English law (which for the U.S. is only a few hundred years old). Scottish common law goes back centuries to the time of Roman occupation and the general laws that citizens would follow. These ancient ways are still used today even though there is no binding legislation. One similarity that I have observed is the U.S. has state and federal governments, and here in Scotland, it is comparable to Scotland and the United Kingdom. Certain rights in the U.S. are divested to the states, and some to the federal government. This is similar here in Scotland, where Scotland maintains certain powers within its parliament as compared to the United Kingdom parliament.

In the U.S., every person that represents another person in a court of law, must be an attorney that has had a legal education and passed the state bar exam for the state they wish to practice in. On the other hand, Scotland allows lay representation in sheriff’s court for certain issues and amounts of money. A lay representative usually has a certain amount of experience and training so that they are competent when presenting a case in court. As a law student, I found this to be a bit of a challenge, but one I accepted with vitality. I was determined to learn Scottish laws and be able to represent persons in court as soon as I could. I was successful in my first court calling, and ensured that I was prepared for any situation that the pursuer or sheriff may present.

Edinburgh Sheriff Court on a typically Scottish sunny day …

One vast difference is the comparison of Sheriff’s court to Municipal court (city court) in the U.S. Even though Sheriff’s court is not as formal as high court, it still is full of tradition. Each representative or solicitor must bow to the seal upon exiting the court room. All solicitors wear robes, and the Sheriff usually wears a wig and robe. Additionally, the Sheriff is referred to as my lady or my lord. In the U.S., generally, judges (as they are referred to) are the only ones to wear robes, and they do not wear wigs. All attorneys usually wear a nice dress suit and no robes, and there is no bowing upon exiting the court.

I have noticed that Scotland is extremely generous with their welfare benefits and ensure that their citizens are well taken care of. In the U.S. welfare benefits are not as generous and generally, can be difficult to obtain. The idea of advice agencies is immensely charitable, especially when citizens of Scotland are not able to obtain the benefits they need, or are unaware of the benefits they should be receiving. In the U.S., usually, there are no agencies to give advice, but merely a place where the people can make claims. If a claim is denied, it is up to the person to figure out how to appeal the decision on their own. Here in Scotland, the government ensures that there are advice agencies to assist people with obtaining the advice they need to obtain benefits.

This has been an immensely eye opening experience for me regarding the legal field. To be able to go to another country and completely immerse myself in a new legal system has shown where the U.S. could improve, and these are ideas that I will take with me.

“Consider this scenario, you’re looking for a flat to rent, you see an advert for one that matches your requirements, you enquire if it is still available, it is and what’s more the letting agent is happy for you to move in. So you pay the first month’s rent and deposit and move in. Yes this is an idealised story of what happens when people rent in the private rented sector and you’d be right to say that there is something missing, like all the admin fees that sometimes come with the renting process.

Whether they are called reservation fees, reference checks charges, credit checks, inventory fees or check-in fees, it seems that when you rent a property from some letting agents you have to pay all the associated fees with setting up the tenancy. And if you refuse to cough up the cash, then you run the chance of losing the property to someone who is willing to pay.

We believe that this should not be the case and Rent (Scotland) Act 1984 offers protection from having to pay fees. It states that any premium in addition to the rent and deposit cannot be charged in the granting, renewing or continuing of a tenancy. This legislation has been law for nearly 30 years, but is regularly misinterpreted or simply ignored.

Here at Shelter Scotland we recently launched the Reclaim your fees campaign to highlight this issue and our Campaigns team visited various towns and universities across the country advising people on unlawful fees and what to do if they think they’ve paid them in the past, or are being asked to pay them to take out a future tenancy.

We also have a dedicated website with a toolkit that can be used to reclaim any fees that you have paid to your letting agent. On the website you’ll find:

template letters

a step-by-step guide on how to about reclaiming your fees

answers to many of the questions you may receive from your letting agent once you have asked for your fees to be returned.

You can also find success stories on the website, such as Scott Kuku who got £320 returned from his letting agent after threatening to take his case to the small claims court and Tim Macdonald who received £150 after his case went to the small claims court.

So far, since the campaign was launched on 7 May 2012, 549 people have used the toolkit to start claiming back over £60k in total.

To find out more about the work of Shelter Scotland follow us on Twitter or Facebook.”